During mouse embryogenesis, blood cells develop closely together with endothelial cells. Therefore, it has been postulated that hematopoietic and endothelial cells share a common progenitor, the hemangioblast. In the past, we have established that Blast colony forming cells (BL-CFCs) from in vitro differentiated embryonic stem (ES) cells represent the hemangioblast. Recently, BL-CFCs have also been identified from developing embryos. By tracking Flk-1, a receptor tyrosine kinase, and Scl, a basic helix-loop-helix transcription factor, we have demonstrated that Flk-1+SCL- mesoderm first arises in developing embryoid bodies (EBs, in vitro differentiated progeny of embryonic stem cells). Flk-1 + mesoderm then generate Flk- 1+SCL+ cells by upregulating Scl. The initially arising Flk-1+SCL+ cells are enriched for hemangioblasts. Within Flk-1+SCL+ cells, Flk-1 is down regulated to finally generate Flk-1-SCL+ hematopoietic progenitors. We previously identified bone morphogenetic protein (BMP)-4 as a critical inducing factor of Flk-1 + mesoderm. In elucidating molecular mechanisms regulating hemangioblast development, we have identified GATA-2 to be up regulated in the Flk-1+Scl+ cells compared to their progeny blast colony cells. Our preliminary studies indicate that GATA-2 was immediately induced by BMP-4. Importantly, exogenous GATA-2 expression could induce Flk-1 + as well as Scl+ cells. This coincided with an increase in blast and hematopoietic colony formation. Based on these findings, we hypothesize that GATA-2 is a critical regulator linking BMP-4 signaling to hemangioblast and hematopoietic development. We posit that GATA-2 carries out this task by upregulating Flk-1 and Scl expression. To test this hypothesis, we will perform promoter assays, chromatin immunoprecipitation studies, and the ES/EB differentiation model. Ultimately, we hope to establish the BMP-4-GATA-2-Flk-1 axis and the BMP-4-GATA-2-Scl axis in regulating hemangioblast and hematopoietic development. Additionally, In vivo developmental potential of ES-derived Flk-1+Scl+ cells will be investigated. The outcome of this study should be relevant for developmental biology as well as for clinical applications concerning hematologic disorders.